telecom italia group...(2) acquisition costs, adv, customer care, other commercial costs 1h opex...

Marco Patuano

Telecom Italia Group

TELECOM ITALIA GROUPdbAccess TMT Conference

London, September 4th, 2015

dbAccess TMT Conference 2

This presentation contains statements that constitute forward looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995. These statements appear in a number of places in this presentation and include statementsregarding the intent, belief or current expectations of estimates regarding future growth in the different business lines and theglobal business, financial results and other aspects of the activities and situations relating to the Telecom Italia Group. Suchforward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results maydiffer materially from those projected or implied in the forward looking statements as a result of various factors. Consequently,Telecom Italia makes no representation, whether expressed or implied, as to the conformity of the actual results with thoseprojected in the forward looking statements. Forward-looking information is based on certain key assumptions which we believeto be reasonable as of the date hereof, but forward looking information by its nature involves risks and uncertainties, which areoutside our control, and could significantly affect expected results. Analysts and investors are cautioned not to place unduereliance on those forward looking statements, which speak only as of the date of this presentation. Telecom Italia undertakes noobligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect eventsand circumstances after the date of this presentation, including, without limitation, changes in Telecom Italia business oracquisition strategy or planned capital expenditures or to reflect the occurrence of unanticipated events. Analysts and investorsshould consult the Company's Annual Report on Form 20-F as well as periodic filings made on Form 6-K, which are on file withthe United States Securities and Exchange Commission which may identify factors that affect the forward looking statementsincluded herein.

The accounting policies adopted in the preparation of the Half-Year Condensed Consolidated Financial Statements as of and forthe six months ended 30 June 2015 have been applied on a basis consistent with those adopted in the Annual ConsolidatedFinancial Statements at 31 December 2014, to which reference should be made, except for the new standards and interpretationsadopted by the Telecom Italia Group starting from 1 January 2015 which had no effects on the Half-Year CondensedConsolidated Financial Statements as of and for the six months ended 30 June 2015. Please note that the limited review on theTelecom Italia Group Half-Year Condensed Consolidated Financial Statements at 30 June 2015 has not yet been completed.

Marco Patuano

Safe Harbour

dbAccess TMT Conference 3Marco Patuano

2Q’15 Main Events

Domestic Improving trends both on Domestic Service

Revenues (+1.6pp QoQ) & Underlying Ebitda(+2.1pp QoQ)

Further recovery in Mobile Service Revenues: -2.5% YoY vs -4.2%YoY in 1Q’15

Solid performance in Fixed Service Revenues: -1.9%YoY vs -4.4% YoY in 1Q’15

Brazil Positive performance on Mobile Business

Generated (+1.1% YoY), supported by very strong performance in Innovative Mobile VAS (+44% YoY)

Negative Service Revenues Trend affected by MTRs, Reduction in Prepaid lines, weak Macro and slowdown in Traditional (-13.9% YoY)

Solid postpaid CB growth: +525k lines in 2Q’15

Inwit

Successful IPO ~36% of Inwit (greenshoeexcluded) delivered to TI in 2Q’15 a net total consideration of 784 mln euro

Related Group-level Net Worth strengthening of 253 mln euro

Real Estate PlanOverall savings of > 150 mln euro per annum

from 2018 Lease renegotiations as of June 30 carry a

IAS-17 impact on Debt of 676 mln euro; yearly cost reduced, no impact on liquidity

Expected Ebitda contribution on FY’15 from the ongoing Plan is about 50 mln euro

Net Debt

Net debt reduction to ~27 bln euro in 2Q’15 vs~27.4 bln euro in 1Q’15 incorporates:

~ -0.7 bln euro from operations, M&A and special projects;

~ +0.1 bln euro for 4G license clean-up costs in Brazil

~ +0.2 bln euro for dividend payments

Charges & Risk Provisions

369 mln euro posted in our 1H’15 Accounts include charges and risk provisions resulting from:

regulatory disputes and penalties and the liabilities related to those expenses,

disputes with former employees, and liabilities with customers and/or suppliers


Mobile Service Revenues

Domestic Revenues are Accelerating their UptrendReported data, € mln, %YoY

Fixed Service Revenues€ mln, %YoY

Marco Patuano

-7.4%-8.6%

-7.2%

-5.3%-4.4%

-1.9%

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

FY’14 -7.1%

-14.9%

-13.3%

-7.1%-5.7%

-4.2%-2.5%

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

FY’14 -10.3%

+6.7 ppYoY

+10.8 ppYoY

1H’15-3.3% YoY 1H’15

-3.1% YoY

8,268 8,541 8,752 8,728 8,677 8,091

409 610 844 1,343 1,803 2,663

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

+201 +234 +499 +460 +860

Internet users

LTEusers

45

103151

231

290

374

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

+58

+48

+80

+59

+84

Fiber CB

9,151 9,596 10,071 10,480 10,7548,677MBBusers 6,933 6,939 6,932 6,921 6,945 6,971BB CB

LTE Coverage

>83%

NGN Coverage

~37%

UBB Mobile KPIs UBB Fixed KPIs


Further Improvement in Underlying Domestic Ebitda

Marco Patuano

€ mln, %YoY

-8% -7%

-3%-4.8%

-2.7%

2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

>+5 pp YoY

-7.5%-11.6% -10.9% -10.2%

-27.7%

2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

Rep

orte

d Eb

itda

Adjustments for one-off effects in

2Q Ebitda YoYperformance:

Und

erly

ing

Ebitd

a

on 2Q’14 on 2Q’15+72 mln euro release TIS

provision~-30 mln euro for

regulatory disputes~-15 mln euro for others

-369 mln euro for charges and risk provisions

~-40 mln euro for labor-related items

~+10 mln euro for others


Lines involvedin

«flatenization»:

~4.1 mln>3mln pay-per-use

voice-only

Opted-Out ~0.2 mln

Churned(cut lines +

migration to competition)

~0.2 mln

Lines movedto flat

monthlybilling:

~3.7 mln

CurrentOpt-Out

Ratio: ~5%

Marco Patuano

1.08% 1.09%

1.13%

1.63%

1.08%

FY'14avg

monthly

Mar '15 Apr'15 May'15 Jun'15

Churn rate on flatenization cluster

Consumer Fixed: the “Tutto Voce” Campaign pushes ahead

After peaking in May on the back of Media and Competitors increased intensity, churn of cluster targeted by “Tutto Voce” is back at 2014 levels

Overall net fixed line losses expected to start reducing from 4Q’15, including structural winback effect from Mobile-Only and continued good performance

in Fixed Gross Adds (~+20% YoY in 2Q’15)


2,314 2,275 2,235 2,230 2,091 1,958

717 799 906 1,049 1,044 1,150

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

3,031 3,073 3,141 3,278 3,135 3,108

+8.9% +7.2% +4.7% +5.4% +3.4% +1.1%

+2.5% -1.6% -6.8% -8.8% -9.6% -13.9%

+36.2% +44.2% +50.5% +57.2% +45.7% +44.0%

+7.8% +8.0% +6.5% +4.6%+1.6%

-5.2%

-0.1%-2.6%

TIM Brasil: More Data & Postpaid fight erosion on Traditional Reported data, R$ mln, %YoY

1,316 1,329 1,330 1,566 1,337 1,260

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

1H’15-1.8% YoY

Resilient Performance despite Challenges & Headwinds: Macro, MTR cut (-33% YoY in 1H) and OTT driving Traditional Services decline

Outstanding pace on Innovative Service Revenues growth: +44% YoY in 2Q

Strong Postpaid performance: CB +11% YoY with 525K net adds in 2Q

Fixed Revenues growth (+14% YoY in 2Q) thanks to Intelig’sbusiness repositioning and positive Fiber Live contribution

EBITDA margin progression (29.2% in 1H, +1.3pp YoY) supported by cost cutting initiatives

Network investments (capex +27% YoY in 1H) driving better quality to support a solid position in data: 157 cities now covered with MBB project. 4G investments: 112% YoY growth in 2Q’15

Highlights

Focus on Mobile Generated(1) ServiceTotal Service Revenues

Innovative

Traditional

Total

Marco Patuano

Before discontinuities

Reported Ebitda

EBITDA

4,099 3,985 4,045 4,196 3,940 3,784

1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15

+0.3%-2.0%

-3.9% -3.4% -3.9%-5.0%

+1.3%-1.3%

-4.0% -3.6% -4.5%-5.7%

Total Service Revenues Mobile Service Revenues

(1) Excluding revenues from: non-TIM clients, wholesale and others


939 922

+2 -21 +3

1H'14 Energy&Power Real Estate& Industrial Rental

Others 1H'15

Proc

ess

Driv

en(1

)

NGN & LTE development

(3)

510 510

+5 +5 -7 -3

1H'14 Adv Commissioning CustomerCare

Others 1H'15Mar

ket D

riven

(2)

o/w+10 Expo

sponsorshipHigher volume

acquisition

(4)

(1) Industrial costs, G&A, Real Estate(2) Acquisition costs, ADV, Customer Care, Other commercial costs

1H Opex Efficiency 2H Expected Opex Efficiency

>100 mln euro 2015 Opex Efficiency confirmed

~+10 ~-60 ~-50

2H'14 Energy Real Estate& Industrial

Others 2H'15

~-100

~+10 ~0 ~-10

2H'14 ADV Commissioning C.Care& other

2H'15

flat

Expo sponsorship

Focus on Domestic Opex

(3) Included Legal Services & other G&A costs; (4) included National Wholesale Penalty

Marco Patuano

Consulting Services: ~-10Network & IT Costs: ~-20Indirect Personnel Costs: ~-20


Take-Aways

FY 2014 Preliminary Results & 2015-2017 Plan OutlineMarco Patuano

Italian Market Context: Working for regulatory peace.

Plan Targets Confirmed: Y-o-Y 2016 Ebitda stabilization in Italy, back to Revenues and Ebitda growth in Brazil.

Italy: Beyond quarterly performance, operational improvements are fully in line with our expectations. In-market consolidation speaks for more rationality.

Brazil: Difficult 2Q’15, but path is set to pursue new value generation from our current 50% MBB Coverage of Urban Population.

Italy: Fiber development remains a priority. About half of the households to be covered by YE’15.

Brazil: Significant 4G buildout on-track to drive further data penetration.

Results

Investments

Future Outlook


Annex

FY 2014 Preliminary Results & 2015-2017 Plan OutlineMarco Patuano


245 256308

353395

~550

2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 FY'15e

Netflix service integrated into Tim Vision Set-top-box

3 year agreement – no exclusivity

Revenues share model

Billing available in TIM invoice

Partnership with Mediaset Premium (DTT) and Mediaset Premium Online (BB)

3 year agreement – exclusivity in the telco arena

Mediaset Premium Online integrated into Tim Vision Set-top-box

Billing Integration - exclusive pricing for TIM

+61.2%

Customer Base, 000 Weekly Acquisition Trend

ADSL60%Fiber

15%

NIP15%

RTG4%

ULL6%

Tutto Fibra58%

TIM Smart22%

Tutto16%

Other4%

Orig

inO

ffer

Mix

Des

tinat

ion

Offe

rMix

Launch in October

Launch in September

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Pay-TV Gains Momentum

2.3x 1.2x

492

1,147 1,390

Avg Apr-May Avg Jun Avg July


Real Estate PlanBuildings Involved Goals

Optimize the number of real estate assets being used as offices or for mixed use in 10 major cities

Improve efficiency in the use of space and implement refurbishments

Plan to apply technological and architectural evolution of the access network (fiber, migration to IP, technology miniaturization) to all mixed-use and industrial real estate assets in order to prepare a roadmap for their use in the medium and long term

Lease contracts renegotiations have already started in size to reduce yearly cost against the extension of the agreements

Economic Impacts of the “10-Cities Project”

~10.7 ~0.1 ~10.8

Industrial & MixedBuildings

Offices Total

Owned by TI 43% 43% 43%

(1)

Marco Patuano

1H’15 FY’15 FY’16 FY’18/’19 onwards

Impact on Net Debt

Cash Savings - ~50 mln euro

~80 mln euro

>150mln euro

~0.7 Bln euro

~1.4 Bln euro

~1.8 Bln euro

~2.0 Bln euro+0.7 +0.4 +0.2

~80mln euro

(1) office & Industrial Building(2) Including financial charges and D&A(3) in compliance with IAS17

Pre taxnet Results(2)(3)

‘000


Focus on Domestic Opex€ mln, YoY

1H’141H’15 YoY

Total 4,0304,529 +499Volume Driven Costs 1,4231,480 +58o/w Interconnection 686705 +19o/w Equipment Costs 482503 +21

Market Driven Costso/w Commisioningo/w Advertisingo/w Customer Care

o/w Other 255272 +17

510510 -9499 +5

113119 +5158151 -7144141 -3o/w Bad Debt & Other

Process Driven Costso/w Operations (Ntw, IT, R&D)o/w Energy & Powero/w Other Industrial

939922 -17246246 -165167 +2528509 -18

Labour Cost 1,4141,494 +80

Other Income / Provision -255123 +378

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Adjustments on Domestic Ebitda

2014 2015 % YoY

IQ IIQ I Half IQ IIQ I Half IQ IIQ IH

EBITDA Reported 1,792 1,709 3,501 1,610 1,236 2,846 -10.2% -27.7% -18.7%

Exchange Rate Fluctuation (5) (5) (10)

Non Recurring Items - 71 71 - (393) (393)Release TIS provisioning 72 72 - -

Employee reduction plan - - (24) (24)

Charges and Provisions for risks (1) (1) (369) (369)

EBITDA Organic net non recurring items 1,797 1,643 3,440 1,610 1,629 3,239 -10.4% -0.9% -5.8%

Discontinuities 60 (41) 19 (45) (9) (54)Labour cost discontinuities 21 - 21 (23) (18) (41)

Other discontinuities 39 (41) (2) (22) 9 (13)

EBITDA Underlying 1,737 1,684 3,421 1,655 1,638 3,293 -4.8% -2.7% -3.8%

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telecom italia group...(2) acquisition costs, adv, customer care, other commercial costs 1h opex...

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